Fiat Chrysler to pay $800 million to settle emissions lawsuits

Fiat Chrysler Automobiles NV will pay an estimated $800 million in fines and costs related to recalling and fixing thousands of vehicles under civil settlements announced Thursday by California and the U.S. Justice Department, which alleged some of its diesel-powered vehicles violated clean-air rules.

‘Multinational corporate bad actor’

“A multinational corporate bad actor seriously violated American emissions laws to the detriment of the health and welfare of the people of the United States,” said Jeffrey Bossert Clark, assistant attorney general for the Justice Department’s Environment and Natural Resources Division. “That is a very serious offense.”

Related: Fiat Chrysler accused of diesel emissions cheating by U.S.

The total costs of the settlements to Fiat Chrysler could top $800 million, based on the settlements with the U.S. government, California, and consumers. The total $307.5 million consumer settlement — with Fiat Chrysler responsible for as much as $280 million — is based on 100% participation by consumers, so is likely to be a lower number.

Consumers will get an average of $2,800 per vehicle in compensation, according to Fiat Chrysler.

Second major case

German parts supplier Robert Bosch GmbH has also agreed to pay up to $27.5 million as part of the settlement with consumers. It will also pay a total of $103.7 million to 50 jurisdictions, according to Maryland Attorney General Brian Frosh.

The settlements mark a milestone in the second major case brought by U.S. officials against an automaker for Clean Air Act violations stemming from diesel vehicles equipped with pollution controls prohibited by U.S. law.

In January 2017, Volkswagen AG pleaded guilty to criminal charges and agreed to pay some $4.3 billion in U.S. penalties for its scheme to deliberately rig hundreds of thousands of U.S. diesel vehicles to cheat on emissions tests. The VW scandal extended to some 11 million other vehicles the company sold worldwide, and led to U.S. criminal charges against eight people. The company has set aside more than $30 billion to cover costs and settlements, including $15 billion to buy back or fix vehicles in the U.S.

Won’t have to admit wrongdoing

Fiat Chrysler won’t have to admit wrongdoing, according to the documents. It will pay owners of roughly 104,000 diesel-powered SUVs and pickups to update the emissions software on the vehicles via a recall, according to a consumer consent decree filed Thursday in federal court in California.

“The settlements do not change the company’s position that it did not engage in any deliberate scheme to install defeat devices to cheat emissions tests,” the automaker said in a statement. “The consent decree and settlement agreements contain no finding or admission with regard to any alleged violations of vehicle emissions rules.”

Related: Dodge truck owners accuse Chrysler of VW-like emissions cheating

The pact will resolve civil claims by the Justice Department on behalf of the U.S. Environmental Protection Agency that some Jeep Grand Cherokee and Ram 1500 models contain pollution-control software that improperly limits pollution during lab tests while allowing the vehicles to spew excess emissions on the road.

Corporate governance reforms

Fiat Chrysler has also agreed to corporate governance reforms intended to prevent future emissions violations under the agreement. To mitigate the vehicles’ excess emissions, Fiat Chrysler will also provide funds and work with a catalytic converter manufacturer to offer drivers better emissions reductions when they replace that part.

Fiat Chrysler will be on the hook for additional penalties if it fails to update the software on at least 85 percent of the affected vehicles within two year, the EPA said in a statement.

The company has has already set aside about $810 million to cover settlements and other costs stemming from the diesel matter.

Masked pollution levels

The Justice Department filed a civil lawsuit against Fiat Chrysler in May 2017, accusing the company of using so-called defeat devices to mask pollution levels of its vehicles so they would pass government tests.

California joined the litigation by filing suit the night before the settlement was formally announced. State Attorney General Xavier Becerra and the California Air Resources Board announced the state will receive $78.4 million as part of the settlement, Becerra said Thursday in a conference call.

“California’s emission standards exist to protect our residents and the environment from harmful pollution,” Becerra said. “Fiat Chrysler tried to evade these standards by installing software to cheat emissions testing. The company not only violated the law and our trust, but did so at the expense of our environment.”

The case is In re Chrysler-Dodge-Jeep EcoDiesel Marketing, Sales Practices and Products Liability Litigation, 17md2777, U.S. District Court for the Northern District of California (San Francisco).

Related: Product recalls are the largest driver of liability claims says Allianz Global

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